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Tuesday, September 27, 2016

Challenging outlook for property sector

KUALA LUMPUR: AllianceDBS Research sees a challenging outlook for the property sector due to the weak affordability and low supply of affordably priced properties.

It said on Tuesday the increasing supply from public housing may intensify competition in affordable segment while slow sales is the new norm.“Top pick: Matrix Concepts, which is an affordable township developer with sustainable earnings and yield,” it said.

AllianceDBS Research believes the existing macro-prudential measures imposed are not overly punishing vis-à-vis those in Singapore, and serve to rein in excessive speculation in the property sector.

Given the high household debt at 89% of GDP, further easing in banks’ prudent lending practice may not bode well for the long-term health of the sector. Credit access for eligible property buyers remains intact, as evident in the 10% growth in outstanding loans for residential properties (as at end-July 2016) despite the higher rejection rates.

“Government focuses on first-time homebuyers. We expect the upcoming Budget 2017 to continue its focus on increasing the supply of affordable public housing (priced less than RM400,000) to boost homeownership.

“There are already various financing schemes and affordable housing programmes to address the challenges of first-time homebuyers in purchasing homes. As home ownership continues to be a national concern, we believe the government will expedite the delivery of affordable public housing,” it said.

AllianceDBS Research said private developers face the challenge of supplying affordably-priced properties at the expense of lower profitability due to the rising cost environment (land, compliance, construction).

Developers will have to revise their product offerings to incorporate more “value-buy” properties with differentiating lifestyle amenities that will distinguish themselves from lower-priced public housing.

The research house believes township developments will offer better sales performance going forward.

“Matrix is the best proxy to affordable housing as it mainly focuses on landed properties priced below RM600,000.

“Its property sales remain robust despite the tough operating environment, and are on track to achieve its record-high property sales of RM1bil in FY17,” it said.